Rating Agencies Now Exposed in the Economic Meltdown of 2008

New Documents Show Rating Agencies Had a Big Hand in Wall St. Crash

There was plenty of blame being thrown around when the economy tanked in 2008. There were those unscrupulous mortgage hustlers who signed people to deals they knew they couldn’t make good on; there were those crooked bankers on Wall St. who sold debt back and forth to each other so fast even they lost control of it; and then there were those politicians who bailed out all the banks when they screwed up so bad that if they went belly-up, they’d take the whole country down with them.

But lost in the shuffle were the big rating agencies. A rating agency, if you didn’t know, is a company whose sole responsibility is to rate a debtor’s ability to pay back the debt and the chance if they’re going to default on that loan. Companies like Moody’s, companies like Standard and Poor’s, these are the top rating agencies. It is their job – their one job! – to rate a person’s ability to pay back a debt. When people were getting approved for mortgages for luxurious dream homes, it was the rating agencies’ job to rubber-stamp “Approved” or “Denied” on those mortgage applications.

Guess what? They were all stamped “Approved”. And by stamping “Approved” on all those loan contracts, these rating agencies are just as culpable in the financial mess as any bank, politician, or realtor.

Thanks to documents recently unearthed by the San Diego-based law firm Robbins Geller Rudman & Dowd as part of a major lawsuit, we have now learned that rating agencies like Moody’s and Standard and Poor’s acted like tools for the major banks. If a large bank – Citigroup, Bank of America, take your pick – wanted a mortgage application approved, the rating agencies were happy to comply.

The sole purpose for having rating agencies in the first place is to regulate the banks. Rating agencies are there, essentially, to keep banks in line. It’s almost like a system of checks-and-balances. If a rating agency sees a dicey loan arrangement, it is their job to deny the validity of that claim.

But they didn’t. They marched to the beat of the big banks and got a nice chunk of money for their loyal service. And in so doing, they are just as guilty as any other institution for the financial meltdown of 2008, from which this country is still struggling to recover.

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